Exhibit 4.1


 


FORBEARANCE
AGREEMENT


 


This Forbearance Agreement (this “Agreement”)
is dated April 3, 2008 and is entered into by and among Vertis, Inc. (“Borrower”),
as Borrower, the other Credit Parties signatory hereto, General Electric
Capital Corporation, as a Lender and as Agent for Lenders (“Agent”), and
the Lenders party hereto.


 


W
I T N E S S E T H :


 


WHEREAS, Borrower, the
other Credit Parties, Agent and Lenders are parties to that certain Credit
Agreement, dated as of December 22, 2004, including all annexes, exhibits
and schedules thereto (as amended by: (i) that certain Limited Consent and
Amendment No. 1 to Credit Agreement, dated as of October 3, 2005; (ii) that
certain Amendment No. 2 to Credit Agreement, dated as of November 22,
2005; (iii) that certain Limited Consent and Amendment No. 3 to
Credit Agreement, dated as of December 12, 2005; (iv) that certain
Amendment No. 4 to Credit Agreement, dated as of May 30, 2006; (v) that
certain Limited Consent and Amendment No. 5 to Credit Agreement, dated as
of September 5, 2006; (vi) that certain Limited Consent and Amendment
No. 6 to Credit Agreement, dated as of November 27, 2006; and (vii) that
certain Limited Consent and Amendment No. 7 to Credit Agreement, dated as
of March 30, 2007; as the same is amended hereby and as it may from time
to time hereafter be further amended, restated, supplemented or otherwise
modified, the “Credit Agreement”);


 


WHEREAS, on April 1,
2008, Borrower failed to make the interest payment due on such date under the
2003 Senior Secured Notes (such circumstances, excluding any further events or
actions, the “Missed Payment”);


 


WHEREAS, Borrower
acknowledges that the Missed Payment constitutes a Default (the “Existing
Default”) under the Credit Agreement;


 


WHEREAS, Borrower acknowledges
and agrees that the Existing Default has occurred and is continuing as of the
date hereof, and has not been cured or waived;


 


WHEREAS, Agent and Lenders have not expressly or
impliedly waived the Existing Default, and as a result of the occurrence of the
Existing Default, Agent and Lenders have the right, among other things, to
determine not to make any Advance or incur any Letter of Credit Obligations
under Section 2.2(b) of the Credit Agreement;


 


WHEREAS, Borrower and the other Credit Parties have
requested that Agent and Lenders forbear from the exercise of their rights and
remedies under the Credit Agreement and the Loan Documents and agree to
continue to make Revolving Credit Advances;


 


WHEREAS,
subject to the terms and conditions hereof, Agent and Requisite Lenders have
agreed to grant these requests; and


 


WHEREAS, this Agreement constitutes a Loan Document
and these Recitals shall be construed as part of this Agreement;


 

















 


NOW, THEREFORE, in
consideration of the mutual covenants set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:


 


1.                                       Defined
Terms.  Each capitalized term used
herein and not otherwise defined herein shall have the meaning attributed to
such term in the Credit Agreement.  Each
of the following capitalized terms shall have the meaning set forth below:


 


(a)                                  “Forbearance
Default” means (i) the occurrence of any Default or Event of Default, other
than the Existing Default or an Event of Default under Section 7.1(b)(1) of
the Credit Agreement on account of the Missed Payment (the “2003 Indenture
Event of Default”), (ii) the failure of Borrower to comply with any
term, condition or covenant set forth in this Agreement, (iii) any
representation made by Borrower under or in connection with this Agreement
shall prove to be false in any material respect as of the date when made, (iv) any
acceleration of the obligations under the 2003 Senior Secured Notes or the
taking of any enforcement action or exercise of any right or remedy by the
holders of the 2003 Senior Secured Notes or the 2003 Senior Secured Notes
Indenture Trustee whether based upon the Missed Payment or otherwise, and/or (v) the
commencement of any proceeding (whether judicial, extra-judicial,
administrative or otherwise) or the taking of any other action to liquidate the
businesses of Borrower or any of the other Credit Parties or the property of
any such Person, or reorganize Borrower or any of the other Credit Parties,
including, without limitation, the appointment of a receiver or other custodian
or the making of an assignment to an assignee for the benefit of creditors or
other custodians.


 


(b)                                 “Forbearance
Period” means the period beginning on the date hereof and ending on the
Forbearance Termination Date.


 


(c)                                  “Forbearance
Termination Date” means the earliest to occur of (i) 5:00 p.m.
(New York time) on May 27, 2008, (ii) the fifth calendar day
following the first day, if any, on which Borrowing Availability is $7,500,000
or less, or (iii) the date upon which a Forbearance Default occurs.


 


2.                                       Agreement
to Forbear.


 


(a)                                  Solely
during the Forbearance Period, Agent and Requisite Lenders hereby agree to
forbear from exercising their right to determine not to make any Advance or
incur any Letter of Credit Obligations (e.g. under Section 2.2(b)) based
on the Existing Default and/or the 2003 Indenture Event of Default or from
exercising (except as set forth in Section 2(d) hereof) any of their other
rights and remedies against Borrower and the other Credit Parties that may
exist by virtue of the Existing Default or the 2003 Indenture Event of Default under
the Credit Agreement (e.g., under Section 7.2 or Section 7.3
thereof) or any of the other Loan Documents.


 


(b)                                 Nothing
in this Agreement shall be construed as a waiver of or acquiescence to the Existing
Default or the 2003 Indenture Event of Default, and the Existing Default shall
continue in existence notwithstanding the agreement of Agent and Requisite
Lenders, as set forth herein, to forbear in the exercise of rights and remedies
against Borrower and the other Credit Parties on the terms and for the period
set forth herein.  Except as expressly 


 


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provided herein, the execution and delivery of this Agreement shall
not: (i) constitute an extension, modification, or waiver of any term or
aspect of the Credit Agreement or the other Loan Documents; (ii) extend
the terms of the Credit Agreement or the due date of any of the Obligations; (iii) give
rise to any obligation on the part of Agent or Lenders to extend, amend, waive or
otherwise modify any term or condition of the Credit Agreement or any of the
other Loan Documents; or (iv) give rise to any defenses or counterclaims
to the right of Agent or Lenders to compel payment of the Obligations or to
otherwise enforce their rights and remedies under the Credit Agreement and the
other Loan Documents.  Except as
expressly limited herein, Agent and Lenders hereby expressly reserve all of
their rights and remedies under the Loan Documents and under applicable law
with respect to the Existing Default and the 2003 Indenture Event of Default.  From and after the Forbearance Termination
Date, Agent and Lenders shall be entitled to enforce the Loan Documents
according to the terms of the Loan Documents. 
Each of Borrower and the other Credit Parties acknowledge and agree that
nothing herein gives rise, or shall be deemed to give rise, to any commitment,
obligation or agreement of Agent or any Lender to provide debtor-in-possession
financing.


 


(c)                                  During
the Forbearance Period, notwithstanding the occurrence and continued existence
of the Existing Default or the existence and occurrence of the 2003 Indenture
Event of Default, Agent and Requisite Lenders (including all Revolving Lenders)
agree that Agent and Revolving Lenders will continue to make Revolving Credit
Advances under the Credit Agreement in accordance with the terms and conditions
thereof and beginning no later than April 7, 2008 generally in accordance
with the Budget (as such term is defined below); provided, further,
that, Borrower shall notify Agent regarding (i) any individual
expenditure in respect of ordinary course operating expenses that is to be made
in an amount equal to or greater than $1,000,000 or (ii) any individual
expenditure in respect of non-operating expenses or non-ordinary course
operating expenses that is to be made in an amount equal to or greater than
$500,000.  Furthermore, during the
Forbearance Period, beginning no later than April 7, 2008, all proceeds of
the Permitted Receivables Financing remitted or otherwise available to Borrower
or Guarantors shall be used generally in accordance with the Budget.


 


(d)                                 Notwithstanding
any provision hereof to the contrary, Agent and Lenders maintain that (X) the
Missed Payment constitutes, as of the day hereof, an Event of Default under Section 7.1(b)(1) of
the Credit Agreement; and (Y) accordingly, Agent has the right, effective as
of April 1, 2008 (the date on which such Event of Default first occurred),
under Section 1.2(d) of the Credit Agreement to charge the Borrower
the Default Rate with respect to interest rates applicable to the Loans and the
Letter of Credit and Unused Line Fees. 
Borrower and the other Credit Parties dispute the statements contained
in clauses (X) and (Y) of the first sentence of this Section 2(d) and
maintain that (I) the Missed Payment does not, as of the date hereof, constitute
an Event of Default; and (II) accordingly, the Agent does not have the
right, as of April 1, 2008 or otherwise until the occurrence (if any) of
the 2003 Indenture Event of Default, to charge the Default Rate.  Each party hereto acknowledges each of the
other parties’ position on these issues. 
Notwithstanding any provision of this Agreement to the contrary, each
party hereto reserves all rights and defenses with respect to these issues.  Borrower and the other Credit Parties further
acknowledge and agree that (A) Agent’s reservation set forth in the
preceding sentence includes a reservation of its right to assert at any time
(and notwithstanding its agreement to otherwise forbear as set forth herein) that
Agent is permitted under the Credit Agreement to charge the Default Rate as of April 1,
2008; (B) the Agent and Requisite Lenders’ 


 


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entry into this Agreement shall not impair or diminish in any way the
right of Agent described in the preceding clause (A); and (C) if Borrower
shall fail to make the interest payment due on April 1, 2008 under the
2003 Senior Secured Notes on or before May 1, 2008 unless waived by the
holders of the 2003 Senior Secured Notes, such failure shall constitute an
Event of Default under Section 7.1(b)(1) of the Credit Agreement.


 


(e)                                  Each
Notice of Revolving Credit Advance and each request for the issuance of a
Letter of Credit shall be accompanied by a certificate, in form and substance
satisfactory to Agent, setting forth Borrowing Availability both before and
after giving effect to the requested Advance or incurrence of Letter of Credit
Obligation (using the Borrowing Base Certificate then required to be delivered
to Agent under the Credit Agreement).


 


(f)                                    No
later than April 7, 2008 (or earlier if available), Borrower shall deliver
to Agent a schedule (in form and substance acceptable to Agent) of expenditures
on a category-by-category basis that Borrower anticipates it or the other
Credit Parties will fund during the Forbearance Period (the “Budget”).


 


(g)                                 During
the Forbearance Period and commencing on April 4, 2008, Borrower shall deliver
to Agent on Friday at the end of each week a rolling 13-week cash flow forecast.


 


3.                                       Conditions
to Effectiveness.  The effectiveness
of this Agreement is expressly conditioned upon Agent’s receipt (on behalf of
itself and each of the Lenders party hereto) from Borrower of the following,
all of which shall be in form and substance satisfactory to Agent:


 


(a)                                  Agreement.  A duly executed counterpart of this Agreement
from Requisite Lenders, Borrower and the other Credit Parties listed on the
signature pages hereto.


 


(b)                                 Other
Documents.  Such other documents,
instruments and agreements as Agent may reasonably request.


 


4.                                       Representations
and Warranties of Borrower.  In order
to induce Agent and Lenders to enter into this Agreement, Borrower hereby represents
and warrants to Agent and Lenders that:


 


(a)                                  Representations
and Warranties.  (i) No Default
or Event of Default (other than the Existing Default) has occurred or is
continuing and (ii) no representation or warranty of any Credit Party
contained in the Credit Agreement or any of the other Loan Documents, including
this Agreement, is untrue or incorrect in any material respect as of the date
hereof, except to the extent that such representation or warranty expressly
relates to an earlier date, in which case it shall be true and correct in all
material respects as of such earlier date.


 


(b)                                 Authorization,
etc.  Each of Borrower and the other
Credit Parties has the power and authority to execute, deliver and perform this
Agreement.  Each of Borrower and the
other Credit Parties has taken all necessary action (including, without
limitation, obtaining approval of its members, if necessary) to authorize its
execution, delivery and performance of this Agreement.  No consent, approval or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of any
other Person, is required in connection with 


 


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Borrower’s or any other Credit Party’s execution, delivery and
performance of this Agreement, except for those already duly obtained.  This Agreement has been duly executed and
delivered by each of Borrower and the other Credit Parties and constitutes the
legal, valid and binding obligation of each of Borrower and the other Credit
Parties, enforceable against them in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law).  Each of Borrower’s and the other Credit
Parties’ execution, delivery or performance of this Agreement does not conflict
with, or constitute a violation or breach of, or constitute a default under, or
result in the creation or imposition of any Lien upon the property of Borrower or
any of the other Credit Parties by reason of the terms of (i) any
contract, mortgage, lease, agreement, indenture or instrument to which Borrower
or any of the other Credit Parties is a party or which is binding upon them or
any one of them, (ii) the February 2003 Senior Subordinated Debt
Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt
Documents or the Mezzanine Debt Documents (iii) any law or regulation or
order or decree of any court applicable to Borrower or any of the other Credit
Parties, or (iv) the certificate of formation or operating agreement of
Borrower or any of the other Credit Parties.


 


5.                                       Release.  In consideration of the agreements of Agent
and Requisite Lenders set forth herein, each of Borrower and each Credit Party
hereby releases, remises, acquits and forever discharges Agent and Lenders, and
each of their respective employees, agents, representatives, consultants,
attorneys, officers, directors, partners, fiduciaries, predecessors, successors
and assigns, subsidiary corporations, parent corporations and related corporate
divisions (collectively, the “Released Parties”), from any and all
actions, causes of action, judgments, executions, suits, debts, claims,
demands, liabilities, obligations, damages and expenses of any and every
character, known or unknown, direct or indirect, at law or in equity, of whatever
nature or kind, whether heretofore or hereafter arising, for or because of any
matter of things done, omitted or suffered to be done by any of the Released
Parties prior to and including the date of execution hereof, and in any way
directly or indirectly arising out of any or in any way connected to this
Agreement, the Credit Agreement or the Loan Documents (collectively, the “Released
Matters”).  Each of Borrower and each
Credit Party hereby acknowledges that the foregoing releases in this Agreement
are intended to be in full satisfaction of all or any alleged injuries or
damages arising in connection with the Released Matters.  Each of Borrower and each Credit Party hereby
represents and warrants to each of Agent and any Lender that it has not purported
to transfer, assign or otherwise convey any right, title or interest in any
Released Matter to any other Person and that the foregoing constitutes a full
and complete release of all Released Matters.


 


EACH OF BORROWER AND EACH
CREDIT PARTY AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR
MISUNDERSTOOD DEFENSES, CLAIMS, CONTRACTS, LIABILITIES, INDEBTEDNESS AND
OBLIGATIONS WHICH ARE RELEASED, WAIVED AND DISCHARGED BY THIS AGREEMENT.  EACH OF BORROWER AND EACH CREDIT PARTY WAIVES
AND RELEASES ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER ANY OTHER
LAW OR ANY APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE
EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES HEREUNDER.


 


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6.                                       Covenant
Not to Sue.  Each of Borrower and
each Credit Party, on behalf of itself and its successors, assigns, and other
legal representatives, hereby absolutely, unconditionally and irrevocably,
covenants and agrees with and in favor of each of the Released Parties that it
will not sue (at law, in equity, in any regulatory proceeding or otherwise) any
Released Party on the basis of any Released Matters released, remised and
discharged by such Person pursuant to Section 5 above.  If each of Borrower and each Credit Party or
any of their respective successors, assigns or other legal representatives
violates the foregoing covenant, both the Person violating such covenant and
Borrower, on a joint and several basis, shall be obligated to pay, in addition
to such other damages as any Released Party may sustain as a result of such
violation, all attorneys’ fees and costs incurred by any Released Party as a
result of such violation.


 


7.                                       Effect
on the Credit Agreement and Loan Documents. 
Except as expressly set forth herein, all of the terms, conditions and
covenants of the Credit Agreement and the other Loan Documents shall remain
unaltered and in full force and effect and shall be binding upon Borrower and
the other Credit Parties in all respects and are hereby ratified and confirmed.


 


8.                                       Costs
and Expenses.  Borrower agrees to pay
on demand all reasonable costs and expenses of Agent in connection with the
preparation, execution and delivery of this Agreement, including the reasonable
fees and out-of-pocket expenses of counsel for Agent with respect thereto.


 


9.                                       Execution
in Counterparts.  This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.  Delivery of an executed signature
page to this Agreement by facsimile transmission or otherwise transmitted
or communicated by email shall be as effective as delivery of a manually
executed counterpart of this Agreement.


 


10.                                 Headings.  Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purposes.


 


11.                                 Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.


 


12.                                 Reviewed
by Attorneys.  Borrower and each
Credit Party represents and warrants to Agent and Lenders that it (a) understands
fully the terms of this Agreement and the consequences of the execution and
delivery of this Agreement, (b) has been afforded an opportunity to have
this Agreement reviewed by, and to discuss this Agreement and the documents
executed in connection herewith, with such attorneys and other persons and
advisors as Borrower may wish, and (c) has entered into this Agreement and
executed and delivered all documents in connection herewith of its own free
will and accord and without threat, duress or other coercion of any kind by any
Person.  The parties hereto acknowledge
and agree that neither this Agreement nor any other documents executed pursuant
hereto shall be construed more favorably in favor of one than the other based upon
which party drafted the same, it being 


 


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acknowledged that all parties hereto contributed substantially to the
negotiation and preparation of this Agreement and the other documents executed
pursuant hereto or in connection herewith.


 


[signature page to follow]


 


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IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first written above. 


 


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  VERTIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  



 


 


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  GENERAL ELECTRIC CAPITAL CORPORATION,

  
	
   

  	
  as Agent, an L/C Issuer and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alan Garson

  
	
   

  	
   

  	
  Alan Garson

  
	
   

  	
   

  	
  Duly Authorized Signatory

  



 


 


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  BANK OF AMERICA, N.A.,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Levenson

  
	
   

  	
  Name:

  	
  Richard Levenson

  
	
   

  	
  Title:

  	
  SVP

  



 


 


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The following Persons are signatory to this Agreement
in their capacity as Credit Parties:


 


	
   

  	
  VERTIS HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS DIGITAL SERVICES LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENTERON GROUP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEBCRAFT, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  USA DIRECT, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  



 


 


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  VERTIS MAILING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEBCRAFT CHEMICALS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Kohn

  
	
   

  	
  Name:

  	
  Barry Kohn

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  



 


 


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